DECONSTRUCTION OF CONSTITUTIONAL LIMITATIONS AND THE TARIFF REGIME OF THE PHILIPPINES: THE STRANGE PERSISTENCE OF A MARTIAL LAW SYNDROME

By: Justice Florentino P. Feliciano (Ret.) The Delegated Tariff-Setting Power of the President A Limited Legislative Power y The power to establish, modify and terminate tariff rates including import and export quotas, tonnage and wharfage dues, and other duties and charges is essentially legislative in nature y ART VI, Sec 1 (CONST.) states that legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives xxx ; Corollarily, ART VI, Sec 24 (CONST.) prescribes that all appropriation, revenue, and tariff bills xxx shall originate exclusively in the House of Representatives y Meanwhile, the authority of the Executive Department in respect of tariff bills, as well as appropriation and revenue bills, enacted by Congress is generally limited to vetoing a particular item or items in the bill [Item Veto Power of the President, ART VI, 27(2) CONST.] y Nevertheless, there is express constitutional authorization to Congress to delegate the exercise of tariff-setting power to the President, subject to certain limitations and restrictions, to wit: 1935 Constitution ART. VI, Sec. 22(2) The Congress may by law authorize the President, subject to such limitations and restrictions as it may impose, to fix, within specified limits, tariff rates, import or export quotas, and tonnage and wharfage dues. 1973 Constitution ART. VIII, Sec. 17(2) The Batasang Pambansa may by law authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import or export quotas, tonnage and wharfage dues, and other duties or imposts. 1987 Constitution ART. VI, Sec. 28(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties and imposts within the framework of the national development program of the Government.

y A cursory reading of the above provision would reveal that the authorization to Congress to delegate its own tariff-setting power to the President is NOT unlimited y Further analysis of this provision may be carried out in 2 levels (1) textually or by looking at the language actually utilized by the Constitution; and (2) looking at the general limitations which flow from the essentially legislative nature of tariff-fixing powers y The constitutional limitations, which emerge from both textual examination of ART VI, Sec 28(2) of the 1987 Constitution and from a consideration of the foundational principles of our very system of government, respecting the delegation of legislative power to fix and revise tariff rates may be summarized in the following terms: (a) The power to delegate belongs to Congress itself: whether or not delegation is to take place and, if so, the extent thereof, is to be determined by Congress alone; (b) The substantive scope of the power delegated is to be prescribed by Congress alone and not by the President who as delegate must act within the limits established by the delegating authority; (c) The power delegated does not, by the fact of its delegation to the President, cease to be a legislative power. As such, it belongs fundamentally and properly to the Legislative Department of Government. This constitutional permission to delegate tariff-fixing power to the President is not a power to impose structural, that is, permanent changes in the distribution of the fundamental powers of Government among the 3 major Departments; (d) Like all other constitutional permission to the Legislative Department to delegate a portion of its lawmaking power, the tariff-setting authority so delegated must be circumscribed by limitations: ratione materiae, ratione temporis or ratione personae Congressional Exercise of the Constitutional Permission to Delegate its Tariff-Setting Powers to the President Republic Act No. 1937 (Tariff and Customs Code of 1957) vs. Presidential Decree No. 1464, As Amended (Tariff and Customs Code of 1978)

RA 1937 (1957 Code) PD 1464 (1978 Code) Section a) The President, upon investigation by the a) In the interest of national economy, general 401 Commission and recommendation of the welfare and/or national security, and subject Flexible National Economic Council, is hereby to the limitations herein prescribed, the Clause empowered to reduce by not more than fifty President, upon recommendation of the per cent or to increase by not more than five National Economic and Development times the rates of import duty expressly fixed Authority (hereinafter referred to as NEDA), is by statute (including any necessary change in hereby empowered: (1) to increase, reduce or classification) when in his judgment such remove existing protective rates of import modification in the rates of import duty is duty (including any necessary change in necessary in the interest of national economy, classification). The existing rates may be general welfare and/or national defense. increased or decreased to any level, in one or b) Before any recommendation is submitted to several stages but in no case shall the the President by the Council pursuant to the increased rate of import duty be higher than a provisions of this section, the Commission shall maximum of one hundred (100) per cent ad conduct an investigation in the course of which valorem; (2) to establish import quota or to it shall hold public hearings wherein interested ban imports of any commodity, as may be parties shall be afforded reasonable necessary; and (3) to impose an additional opportunity to be present, to produce evidence duty on all imports not exceeding ten (10) per and be heard. The Commission may also cent ad valorem whenever necessary: request the views and recommendations of any Provided, That upon periodic investigations government office, agency or instrumentality, by the Tariff Commission and and such office, agency or instrumentality shall recommendation of the NEDA, the President cooperate fully with the Commission. may cause gradual reduction of protection c) The President shall have no authority to levels granted in Section One Hundred Four transfer articles from the duty-free list to the (104) of this Code, including those dutiable list nor from the dutiable list to the subsequently granted pursuant to this section. duty-free list of the tariff. xxxxxx xxxxxx g) Any order issued by the President pursuant to the provisions of this section shall take effect thirty days after its issuance. h) xxx xxx xxx i) The authority herein granted to the President shall be exercised only when Congress is not in session. Section a) For the purpose of expanding foreign markets a) For the purpose of expanding foreign markets 402 for Philippine products as a means in assisting for Philippine products as a means of Promotion in the economic development of the country, assistance in the economic development of the in overcoming domestic unemployment, in country, in overcoming domestic of Foreign increasing the purchasing power of the unemployment, in increasing the purchasing Trade Philippine peso, and in establishing and power of the Philippine peso, and in maintaining better relationship between the establishing and maintaining better relations Philippines and other countries, the President, between the Philippines and other countries, upon investigation by the Commission and the President is authorized from time to time: recommendations of the National Economic 1) To enter into trade agreements with Council, is authorized from time to time: foreign governments or instrumentalities 1) To enter into trade agreements with thereof; foreign governments or instrumentalities 2) To modify import duties (including any necessary change in classification) and thereof; and other import restrictions, as are required 2) To modify import duties (including any or appropriate to carry out and promote necessary change in classification) and foreign trade with other countries: other import restrictions, as are required Provided, however, That in modifying or appropriate to carry out and promote import duties, or fixing import quota the foreign trade with other countries:

Provided, however, That in modifying import duties, no increase shall exceed by five times or the decrease be more than fifty per cent of the rate of duty expressly filed by this Code. b) xxx xxx xxx c) Every trade agreement concluded pursuant to this section shall be subject to termination upon due notice to the foreign government concerned at the end of not more than five years from the date on which the agreement comes into force and, if not then terminated, shall be subject to termination thereafter upon not more than six month s notice. d) The authority of the President to enter into trade agreements under this Section shall terminate on the expiration of five years from the date of enactment of this Code: Provided, That trade agreements concluded pursuant to the provisions of this section and subsisting as of the date of the expiration of this authority shall remain in full force for the period fixed in the agreement in and may not be extended but may sooner be terminated in accordance with the preceding subsection. e) xxx xxx xxx f) Before any trade agreement is conducted with any foreign government or instrumentality thereof, reasonable public notice of the intention to negotiate an agreement with such a government or instrumentality shall be given in order that any interested person may have an opportunity to present his views to the Commission which shall seek information and advice from the Department of Agriculture and Natural Resources, the Department of Commerce and Industry, the Central Bank of the Philippines and from such other sources as it may deem appropriate

requirements prescribed in subsection a of Section 401 shall be observed: Provided, further, That any modification of import duties and any fixing of import quotas made pursuant to the Agreement on ASEAN Preferential Trading Arrangements ratified on August 1, 1977 shall not be subject to the limitations of the aforesaid subsection a of Section 401.

y The most salient change as seen in the formulation of Section 401 of the 1978 Code, in contrast to the Section 401 of the 1957 Code, is that the quantitative limits (floor and ceiling of the reduced and increased tariff rates) have been eliminated y The floor limitation in the 1957 Code of decreases of tariff rates was removed the 50% max. reduction of MFN rates set out in Sec. 104 of the old Code was reduced to 0% in the 1978 Code this means that no quantitative limitation on decreases of tariff rates is imposed on the President when modifying tariffs via executive order or trade agreement y Meanwhile, ceiling on increases of tariff rates was lowered from the 500% of the old Code to 100% ad valorem in the 1978 Code y Significantly, also, the prohibition under the old Code on shifting (transferring) by executive order articles listed as duty-free to dutiable and vice versa was dispensed with y Corollarily, these changes in the rates of decreases and increases in tariff set out in Sec. 104 by the President applies to the trade agreement clause as provided in Sec. 402; the time limitations in the old Sec 402 were also dispensed with in the version of the 1978 Code

in short ALL THE LIMITATIONS ON TARIFF REDUCTIONS TEXTUALLY EMBODIED IN SECTIONS 401 AND 402 OF THE 1957 CODE WERE WIPED OUT AND TORN DOWN y The practical effect of these changes was to make possible the collapsing ( deconstruction ) of the entire tariff regime of the country at any time the President might think it desirable Constitutional Status of Sections 401 and 402 of the 1978 Code under the 1987 Constitution - Do Sections 401 and 402 of the 1978 Tariff and Customs Code continue in effect today under the 1987 Constitution? FELICIANO: They should NOT have any effectivity whatsoever! This is because Sections 401 and 402 of the 1978 Code are plainly inconsistent with Art. VI, Sec. 28(2) of the 1987 Constitution (a) The wiping away of the specified limits within which the President may fix or revise tariff rates by executive orders or trade agreements; and (b) the removal of the time restrictions when the President s delegated tariff-fixing power may not be exercised are NOT reconcilable with the constitutional mandate that the delegation of tariff-fixing powers shall be subject to limitations and restrictions imposed by Congress The reinvented Sections 401 and 402 of the Tariff and Customs Code are also inconsistent with the fundamental principle of separation of powers and its companion doctrine of checks and balances REGRETTABLY, THE SUPREME COURT OF THE PHILIPPINES, TO DATE, NEVER HAD AN OPPORTUNITY TO PASS UPON THE CONSTITUTIONAL VIABILITY OF SECTIONS 401 AND 402 OF THE TARIFF AND CUSTOMS CODE. HENCE, THESE PROVISIONS DE FACTO CONTINUES IN EFFECT. Post-1987 Practice: Persistent Deconstruction of the Tariff Regime of the Philippines y In general, the tariff issuances of the Marcos regime were left standing and effective; worse, each of the four Presidents elected into office after Martial Law continued the tariff-setting practice initiated by Marcos Presidents Corazon C. Aquino, Fidel V. Ramos, Joseph E. Estrada, Gloria M. Arroyo all issued executive orders and entered into trade agreements unilaterally revising tariff rates for numerous products in numerous instances, and in doing so, these Presidents consistently referred to Sections 401 and 402 of the 1978 Code y Relatedly, to this day, Congress has not undertaken any effort to systematically re-examine Sections 401 and 402 of the Martial Law Code, Art. VI, Sec. 28(2) of the 1987 Constitution notwithstanding. Ever since PD 1464 was promulgated, Congress has not retrieved for itself the tariff-setting power which it had delegated to the President 52 years ago in the 1957 Code. As such, de facto, the task and function of fixing and revising tariff rates has effectively been taken over by the President of the Philippines y Operationally, these changes translated into an imbalance in powers respecting tariff-fixing. Unsurprisingly, this bred manifold issues of efficiencies and economies which have had a significant effect in the overall standing of our economic situation y For in this restructured, constitutionally-flawed practice that persists in the realm of tariff-setting, it likely to be more difficult to ensure that long term perspectives and more inclusive and broader interests are, as they should be, taken into account (rather than exclusive and narrow economic interests) y And it doesn t need any more emphasis to note that the primacy of broad and inclusive interests and long-term perspectives is at the heart of the pluralistic, just, open and caring society that our Constitution seeks to project for the people of the Philippines